-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QOzCRdcPAYPORIDrzeEYxGiGUjWyCaJV/O2UCVULGTt0xeD5++Mip7NgJGLW8cdQ 7MxqJnaPmKuQ3FUwvfpVnQ== 0000891092-00-000171.txt : 20000309 0000891092-00-000171.hdr.sgml : 20000309 ACCESSION NUMBER: 0000891092-00-000171 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000412 FILED AS OF DATE: 20000308 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN J P & CO INC CENTRAL INDEX KEY: 0000068100 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 132625764 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-05885 FILM NUMBER: 563469 BUSINESS ADDRESS: STREET 1: 60 WALL ST CITY: NEW YORK STATE: NY ZIP: 10260 BUSINESS PHONE: 2124832323 MAIL ADDRESS: STREET 1: 500 STANTON CHRISTIANA RD STREET 2: ATTN RANDY REDCAY CITY: NEWARK STATE: DE ZIP: 19713 DEF 14A 1 NOTICE & PROXY STATEMENT SCHEDULE 14A (Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (AMENDMENT NO. ) Filed by the Registrant [X] Filed by party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission Only (as permitted by Rule 14a-6 (e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Under Rule 14a-12 J.P. Morgan & Co. Incorporated ----------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) ----------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) Payment of Filing Fee (Check appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: ------------------------------------------------------------------- (2) Aggregate Number of securities to which transaction applies: ------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------- (5) Total fee paid: ------------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. (1) Amount previously paid: ------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------- (3) Filing Party: ------------------------------------------------------------------- (4) Date Filed: ------------------------------------------------------------------- Notice of Annual Meeting of Stockholders Wednesday, April 12, 2000 11:00 A.M. ================================================== J.P. Morgan & Co. Incorporated Morgan Hall West 46th Floor, 60 Wall Street New York, New York March 8, 2000 To our stockholders: We are pleased to invite you to attend our 2000 annual meeting of stockholders to: o Elect 15 directors, o Approve the appointment of PricewaterhouseCoopers LLP as independent accountants for 2000, o Act on one stockholder proposal to be presented, and o Conduct other business properly brought before the meeting. Stockholders of record at the close of business on February 25, 2000, may vote at the meeting. Your vote is important. Whether or not you plan to attend the meeting, please sign, date, and return the enclosed proxy card in the envelope provided. If you are a registered stockholder, you may also vote by telephone or electronically through the Internet. Instructions are included on your proxy card. You may change your vote by sending in a signed proxy card with a later date, a later telephone or Internet vote, or by attending the meeting and voting in person. Rachel F. Robbins Secretary JP Morgan Proxy statement table of contents ================================================== Information about the annual meeting and voting 1 Item 1: Election of directors ................. 2 Biographies of our Board nominees ..... 3 Committees of the Board of Morgan ..... 8 Committees of the Board of the Bank ... 9 Director compensation ................. 9 Our executive officers ................ 10 Stock ownership of management ......... 11 Stock ownership of certain beneficial owners .............................. 12 Compensation committee report on executive compensation .............. 12 Summary compensation table ............ 16 Stock options ......................... 17 Stock performance graphs .............. 18 Retirement benefits ................... 19 Transactions with directors and officers ............................ 20 Item 2: Approval of PricewaterhouseCoopers LLP as independent accountants ............ 21 Item 3: Stockholder proposal relating to director share ownership .............. 21 Item 4: Other matters ......................... 22 Section 16(a) beneficial ownership reporting compliance ................ 22 Proxy solicitation .................... 22 Stockholder proposals ................. 22 Information about the annual meeting and voting ================================================== The Board of Directors of J.P. Morgan & Co. Incorporated (which we refer to in this proxy statement as "Morgan") is soliciting your proxy to vote at our 2000 annual meeting of stockholders (or at any adjournment of the meeting). This proxy statement summarizes the information you need to know to vote at the meeting. We began mailing this proxy statement and the enclosed proxy card on or about March 8, 2000, to all stockholders entitled to vote. Stockholders who owned Morgan common stock, our only class of voting stock, at the close of business on the record date, February 25, 2000, are entitled to vote. As of this record date, there were 164,265,059 shares of Morgan common stock outstanding. We are also sending the Morgan 1999 Annual Report, which includes our financial statements, along with this proxy statement. Date, time, and place Date: Wednesday, April 12, 2000 of meeting Time: 11:00 a.m. Place: Morgan Hall West, 46th Floor 60 Wall Street, New York, New York Voting your proxy Each share of Morgan common stock that you own entitles you to one vote. The proxy card indicates the number of shares that you own. Whether or not you plan to attend the annual meeting, we urge you to complete, sign, and date the enclosed proxy card and return it promptly in the envelope provided. Returning the proxy card will not affect your right to attend the meeting and vote. If you are a registered stockholder, you may also vote by telephone or electronically through the Internet. Instructions are included on your proxy card. If your shares are held in "street name," you should contact your broker, bank, or other nominee to determine whether you will be able to vote by telephone or electronically. If you properly fill in your proxy card and send it to us in time to vote, your "proxy" (one of the individuals named on your proxy card) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, your proxy will vote your shares as recommended by the Board as follows: o "FOR" the election of all 15 nominees for director (as described on page 2), o "FOR" the approval of PricewaterhouseCoopers LLP as independent accountants for 2000 (as described on page 21), and o "AGAINST" the stockholder proposal to be presented (as described on page 21). If any other matter is presented at the meeting, your proxy will vote in accordance with his or her best judgment. At the time this proxy statement went to press, we knew of no matters needing to be acted on at the meeting except for those discussed in this proxy statement. Revoking your proxy o You may send in another signed proxy card with a later date proxy or a later telephone or Internet vote, o You may notify our Secretary in writing before the meeting that you have revoked your proxy, or o You may vote in person at the meeting. 1 Voting in person If you plan to attend the meeting and vote in person, we will give you a ballot when you arrive. However, if your shares are held in the name of your broker, bank, or other nominee, you must bring an account statement or letter from the nominee indicating that you are the beneficial owner of the shares on February 25, 2000, the record date for voting. Appointing your own If you want to give your proxy to someone other proxy than the individuals named as proxies on the proxy card, you may do so by crossing out the names of those individuals and inserting the name of the individual you are authorizing to vote. Either you or that authorized individual must present the proxy card at the meeting. Quorum requirement A quorum is necessary to hold a valid meeting. A majority of the shares entitled to vote in person or by proxy at the meeting constitutes a quorum. Abstentions and broker "non-votes" are counted as present for establishing a quorum. A broker non-vote occurs on an item when a broker is not permitted to vote on that item absent instruction from the beneficial owner of the shares and no instruction is given. Vote necessary to Item 1: Election of directors approve proposals * Directors are elected by a plurality vote of shares present at the meeting, meaning that the director nominee with the most affirmative votes for a particular slot is elected for that slot. Only the number of votes "for" and "against" affect the outcome. Abstentions have no effect on the vote. Item 2: Approval of independent accountants * Approval requires the affirmative vote of a majority of the shares present at the meeting in person or by proxy. Abstentions are counted and have the effect of a vote "against." Item 3: Stockholder proposal * Same as for Item 2. -------------------------------------------------- * Under New York Stock Exchange rules, if your broker holds your shares in its name, the broker is permitted to vote your shares on Items 1 and 2 even if it does not receive voting instructions from you. Your broker may not vote your shares on Item 3 absent instructions from you. Without your voting instructions, a broker non-vote will occur on Item 3 but will have no effect on the vote. Confidentiality of voting Proxies, ballots, and voting tabulations identifying stockholders are kept confidential and will not be available to anyone except as actually necessary to meet legal requirements. Item 1: Election of directors -------------------------------------------------- Our Board of Directors has nominated 15 directors for election at the annual meeting. Each nominee is currently serving as one of our directors. If you reelect them, they will hold office until the next annual meeting or until their successors have been elected. Your proxy will vote for each of the nominees unless you specifically withhold authority to vote for a particular nominee. 2 If any nominee is unable to serve, your proxy may vote for another nominee proposed by the Board or the Board may reduce the number of directors to be elected. All nominees are currently also directors of Morgan Guaranty Trust Company of New York (which we refer to in this proxy statement as the "Bank"). Roberto G. Mendoza, who has served as Vice Chairman and director of Morgan and the Bank since 1990, has announced his intention to retire as Vice Chairman in April 2000. He will not stand for reelection at the annual meeting. Richard D. Simmons, who has served as a director since 1990, will not stand for reelection at the annual meeting. Kurt F. Viermetz, who has served as a director since 1990, will not stand for reelection at the annual meeting. During 1999 there were eight meetings of the Board of Directors of Morgan. Each director attended at least 75 percent of the meetings of the Board and committees of which he or she was a member. Biographies of our Board nominees -------------------------------------------------- Douglas A. Warner III Director since 1990, Age 53 [PHOTO OMITTED] Chairman of the Boards of Morgan and the Bank (since January 1995) and President of Morgan and the Bank (since January 1990). Chairman of the Executive Committees of Morgan and the Bank. Director of Anheuser-Busch Companies, Inc., General Electric Company, and The New York Clearing House Association. Member of the Board of Counselors of Bechtel Group, Inc. Chairman of the Board of Managers and the Board of Overseers of Memorial Sloan-Kettering Cancer Center. Trustee of Pierpont Morgan Library. Member of The Business Roundtable and The Business Council. -------------------------------------------------- Paul A. Allaire Director since 1997, Age 61 [PHOTO OMITTED] Chairman of the Board (since May 1991) and Director of Xerox Corporation (office equipment). Mr. Allaire was Chief Executive Officer of Xerox Corporation from August 1990 to April 1999. Member of the Audit Committee and the Committee on Fiduciary Matters of Morgan and the Examining Committee of the Bank. Director of Sara Lee Corporation, SmithKline Beecham p.l.c., Lucent Technologies, and priceline.com Incorporated. Member of the Boards of Council on Competitiveness, Council on Foreign Relations, New York City Ballet, Ford Foundation, and Catalyst. Member of The Business Council and National Academy of Engineering. Trustee of Worcester Polytechnic Institute and Carnegie-Mellon University. 3 -------------------------------------------------- Riley P. Bechtel Director since 1995, Age 47 [PHOTO OMITTED] Chairman (since January 1996), Chief Executive Officer (since June 1990), and Director of Bechtel Group, Inc. (engineering and construction). Member of the Committee on Management Development and Executive Compensation and the Committee on Fiduciary Matters of Morgan. Director of Fremont Group, L.L.C., Fremont Investors, Inc., and Sequoia Ventures Inc. Member of American Society of Corporate Executives, The Business Council, The Business Roundtable, The Trilateral Commission, The National Petroleum Council, The Conservation Fund Corporate Council, and Indian School of Business Governing Board. Member of Dean's Advisory Council of Stanford University School of Law. Director of Jason Foundation for Education. -------------------------------------------------- Lawrence A. Bossidy Director since 1998, Age 65 [PHOTO OMITTED] Chairman of the Board (since December 1999) and Director of Honeywell International Inc. (diversified manufacturing). Mr. Bossidy was Chairman of the Board (from January 1992 to November 1999) and Chief Executive Officer and Director (from July 1991 to November 1999) of AlliedSignal Inc. Member of the Committee on Risk Policies of Morgan and the Committee on Employment Policies and Benefits of the Bank. Director of Merck & Co., Inc., Champion International Corporation, and Industry to Industry, Inc. Member of The Business Council. -------------------------------------------------- Martin Feldstein Director since 1993, Age 60 [PHOTO OMITTED] President and Chief Executive Officer of National Bureau of Economic Research, Inc. (private, non-profit research organization) and Professor of Economics at Harvard University (since 1969). Chairman of the Committee on Risk Policies of Morgan and member of the Committee on Employment Policies and Benefits of the Bank. Director of TRW Inc., American International Group, Inc., and Columbia-HCA, Inc. Member of Council on Foreign Relations, The Trilateral Commission, American Academy of Arts and Sciences, American Philosophical Society, and Corporation of Massachusetts General Hospital. -------------------------------------------------- Ellen V. Futter Director since 1997, Age 50 [PHOTO OMITTED] President and Trustee of American Museum of Natural History (since November 1993). Ms. Futter served as President of Barnard College from May 1981 through September 1993. Member of the Committee on Risk Policies of Morgan and the Committee on Employment Policies and Benefits of the Bank. Director of American International Group, Inc., Bristol-Myers Squibb Company, and Consolidated Edison, Inc. Member of Council on Foreign Relations, American Academy of Arts and Sciences, and Advisory Board of the Yale School of Management. Director of New York City Partnership. 4 -------------------------------------------------- Hanna H. Gray Director since 1976, Age 69 [PHOTO OMITTED] President Emeritus and Harry Pratt Judson Distinguished Service Professor of History of The University of Chicago (since July 1993). Dr. Gray was President of The University of Chicago from July 1978 to July 1993. Chairman of the Committee on Fiduciary Matters and member of the Committee on Director Nominations and Board Affairs of Morgan. Director of Cummins Engine Co., Inc. Trustee of Andrew W. Mellon Foundation, Harvard University, and Howard Hughes Medical Institute. Member of Council on Foreign Relations, American Academy of Arts and Sciences, and American Philosophical Society. Regent of The Smithsonian Institution. -------------------------------------------------- Walter A. Gubert Director since 1998, Age 52 [PHOTO OMITTED] Vice Chairman of the Boards of Morgan and the Bank (since March 1998) and member of the Executive Committees of Morgan and the Bank. Mr. Gubert was Managing Director of the Bank from September 1989 to February 1998, Chairman of the Bank's European Management Committee from June 1993 to December 1997, and Senior Regional Executive for Europe from March 1995 to December 1997. -------------------------------------------------- James R. Houghton Director since 1982, Age 63 [PHOTO OMITTED] Chairman Emeritus of the Board of Corning Incorporated. Mr. Houghton was Chairman of the Board and Chief Executive Officer of Corning Incorporated from April 1983 to April 1996. Chairman of the Committee on Management Development and Executive Compensation of Morgan. Member of the Executive Committees of Morgan and the Bank. Director of Corning Incorporated, Exxon Mobil Corporation (formerly Exxon Corporation), and Metropolitan Life Insurance Company. Trustee of Metropolitan Museum of Art, Corning Museum of Glass, and Pierpont Morgan Library. Member of The Business Council and Harvard Corporation. -------------------------------------------------- James L. Ketelsen Director since 1977, Age 69 [PHOTO OMITTED] Retired Chairman of the Board and Chief Executive Officer of Tenneco Inc. (diversified industrial). Mr. Ketelsen was Chairman of the Board of Tenneco Inc. from July 1978 to May 1992 and Chief Executive Officer from July 1978 to January 1992. Chairman of the Audit Committee and member of the Committee on Fiduciary Matters of Morgan and Chairman of the Examining Committee of the Bank. Director of GTE Corporation and Sara Lee Corporation. Trustee of Northwestern University. 5 -------------------------------------------------- John A. Krol Director since 1997, Age 63 [PHOTO OMITTED] Retired Chairman of the Board of E.I. du Pont de Nemours and Company (global chemical and energy). Mr. Krol was Chairman of the Board from October 1997 to January 1999 and Chief Executive Officer of DuPont from December 1995 to February 1998, President from October 1995 to October 1997, and Vice Chairman from March 1992 to October 1995. Member of the Audit Committee and Committee on Director Nominations and Board Affairs of Morgan and the Examining Committee of the Bank. Director of Mead Corporation, Armstrong World Industries, Inc., and Milliken Corporation. Member of Board of Trustees of Tufts University, University of Delaware, and Graduate Engineering for Minorities Consortium. Member of Advisory Board of Bechtel Corporation and Teijin Limited. Member of The Business Council. Trustee of Hagley Museum. -------------------------------------------------- Michael E. Patterson Director since 1995, Age 57 [PHOTO OMITTED] Vice Chairman of the Boards of Morgan and the Bank (since December 1995) and member of the Executive Committees of Morgan and the Bank. Mr. Patterson was Chief Administrative Officer of Morgan and the Bank from November 1994 to December 1995 and Executive Vice President and General Counsel of Morgan and the Bank from March 1987 to November 1994. Director of Euroclear Clearance System S.C., Euroclear Clearance System Public Limited Company, The Clearing House Interbank Payments Company L.L.C., Foreign Policy Association, and Trust for Public Land. Trustee of Columbia University. -------------------------------------------------- Lee R. Raymond Director since 1987, Age 61 [PHOTO OMITTED] Chairman of the Board and Chief Executive Officer (since December 1999) and Director of Exxon Mobil Corporation. Mr. Raymond was Chairman of the Board, Chief Executive Officer, and Director of Exxon Corporation from April 1993 to November 1999 and President from January 1987 to April 1993. Chairman of the Committee on Director Nominations and Board Affairs and member of the Committee on Management Development and Executive Compensation of Morgan. Director of American Petroleum Institute and United Negro College Fund. Trustee of Southern Methodist University and Wisconsin Alumni Research Foundation. Member of National Academy of Engineering, The Business Council, The Business Roundtable, Council on Foreign Relations, Emergency Committee for American Trade, National Petroleum Council, The Trilateral Commission, and The University of Wisconsin Foundation. 6 -------------------------------------------------- Lloyd D. Ward Director since 1999, Age 51 [PHOTO OMITTED] Chairman of the Board and Chief Executive Officer (since August 1999) and Director of Maytag Corporation (home and commercial appliances). Mr. Ward was President and Chief Operating Officer of Maytag Corporation from February 1998 to August 1999, Executive Vice President and President of Maytag Appliances (Maytag's major home appliances division) from April 1996 to February 1998. Prior to joining Maytag Corporation, Mr. Ward worked for eight years at PepsiCo, Inc., where he held a variety of executive positions. Member of the Audit Committee of Morgan and the Examining Committee of the Bank. Member of Executive Leadership Council in Washington, D.C. -------------------------------------------------- Douglas C. Yearley Director since 1993, Age 64 [PHOTO OMITTED] Chairman of the Board (since May 1989) and Director of Phelps Dodge Corporation. Mr. Yearley was Chief Executive Officer of Phelps Dodge Corporation from May 1989 to December 1999. Member of the Committee on Management Development and Executive Compensation and the Committee on Director Nominations and Board Affairs of Morgan. Director of USX Corporation, Lockheed Martin Corporation, and Southern Peru Copper Corporation. Director of National Mining Association, International Copper Association, and Center for Compatible Economic Development. Member of Copper Development Association and The Business Council. Director of Phoenix Symphony. 7 Committees of the Board of Morgan ================================================== Audit Committee James L. Ketelsen (Chairman), Paul A. Allaire, John A. Krol, Lloyd D. Ward This committee, which met six times during 1999, is responsible for overseeing the financial reporting process and the effectiveness of internal controls of Morgan and its consolidated subsidiaries, including the Bank, and for recommending to the Board of Morgan the designation each year of independent accountants. Committee on James R. Houghton (Chairman), Riley P. Bechtel, Management Lee R. Raymond, Douglas C. Yearley Development and Executive This committee, which met six times during 1999, Compensation is responsible for advising the Board, in consultation with senior management, on the development of key executives and recommending or approving their compensation, including the following: (1) evaluating, on a periodic basis, the performance of senior officers and succession planning for key executives, including the Chairman, and making recommendations to the Board; (2) supervising the administration of our incentive and stock plans; (3) reviewing and approving all awards and options granted under our incentive and stock plans and making recommendations to the Board with respect to awards and options for certain members of senior management; and (4) reviewing officer compensation policies. Committee on Martin Feldstein (Chairman), Lawrence A. Bossidy, Risk Policies Ellen V. Futter This committee, which met twice during 1999, is responsible for overseeing: (1) the effectiveness of Morgan's overall credit and market risk management policies and practices, including related capital and liquidity management; (2) changes in policies and practices relating to the management of credit and market risk; and (3) reports on the nature and level of credit and market risk exposures and related market developments. Committee on Lee R. Raymond (Chairman), Hanna H. Gray, John A. Director Nomunations Krol, Douglas C. Yearley and Board Affairs This committee, which met three times during 1999, is responsible for making recommendations to the Board with respect to the qualifications and nominations of directors, directors' functions, committees, compensation and retirement, and other matters affecting directors. In determining its recommendations, this committee will consider nominees recommended by stockholders. Stockholder recommendations should be made in writing, addressed to this committee, attention of the Secretary of J.P. Morgan & Co. Incorporated, 60 Wall Street, New York, New York 10260-0060. Committee on Hanna H. Gray (Chairman), Paul A. Allaire, Riley Fiducidary Matters P. Bechtel, James L. Ketelsen, Richard D. Simmons This committee, which met twice during 1999, is responsible for reviewing the general conduct of the business of the departments and affiliates of Morgan and the Bank engaged in investing and administering assets held for others in trust and investment management accounts. 8 Committees of the Board of the Bank ================================================== Examining Committee James L. Ketelsen (Chairman), Paul A. Allaire, John A. Krol, Lloyd D. Ward This committee, which met six times during 1999, is responsible for examinations of the Bank in accordance with New York State banking law. Committee on Richard D. Simmons (Chairman), Lawrence A. Employment Policies Bossidy, Martin Feldstein, Ellen V. Futter and Benefits This committee, which met twice during 1999, is responsible for reviewing the Bank's Retirement, Deferred Profit Sharing, and Long-Term Disability Plans, employee benefit plans, employee relations and affirmative action programs, and diversity initiatives. Director compensation ================================================== We provide the following compensation to our directors for their services as directors. Annual fees o Each non-employee director receives an annual retainer of $30,000 and an attendance fee of $1,200 for each meeting of the Board of Morgan and the Bank attended. o We also pay our non-employee directors for serving on committees of the Boards: an annual retainer of $20,000 for the Chairman and $12,500 for the members of the Audit Committee, the Committee on Risk Policies, and the Committee on Management Development and Executive Compensation, and $10,000 for the Chairman and $7,500 for the members of the other committees. The members of the Audit Committee also serve on the Bank's Examining Committee but receive no additional retainer for this service. o We also reimburse directors for travel expenses to meetings of the Boards and committees. Director Stock Plan Under a Director Stock Plan (1992), as amended, non-employee directors receive an annual award of share credits for 500 shares of Morgan common stock for their service during the preceding year. This award is pro rated where a director did not serve for all of the preceding year. After termination of service as a director, all awards are paid in shares of stock to the director, or, in the case of death, to their designated beneficiary or estate. This award is credited annually with dividend equivalents. Deferred Compensation Under our Deferred Compensation Plan for Plan for Directors' Fees Directors' Fees, non-employee directors may defer their compensation for services as Board or committee members. The plan permits directors to make separate deferral elections as to their annual retainer and their meeting fees. Participating directors may elect under the plan to direct Morgan or the Bank to credit deferred amounts to a cash account, a stock account, or a combination of both. The plan provides that amounts deferred to the cash account are credited annually with interest earned. Amounts deferred to the stock account are credited annually with dividend equivalents. Participating directors are entitled to receive a cash distribution of the balance in their accounts in full or in up to fifteen annual installments after termination of service as a director. The Bank's Directors Retired non-employee directors are eligible to Advisory Council serve as members of the Bank's Directors Advisory Council. Members of the council receive an annual retainer of $30,000. 9 Our executive officers ================================================== The following individuals are the current executive officers of Morgan. The Chairman of the Board, President, Chairman of the Executive Committee, and Vice Chairmen of the Board of Morgan are elected annually by the Board of Directors to serve until the next annual election of officers and until their respective successors have been elected and have qualified. All other executive officers are elected annually and hold office at the pleasure of the Board of Directors. Douglas A. Warner III Age 53 Chairman of the Boards and President of Morgan and the Bank. See "Election of directors" on page 3. Walter A. Gubert Age 52 Vice Chairman of the Boards of Morgan and the Bank. See "Election of directors" on page 5. Roberto G. Mendoza Age 54 Vice Chairman of the Boards of Morgan and the Bank since January 1990. Mr. Mendoza has announced that he will retire as Vice Chairman. Michael E. Patterson Age 57 Vice Chairman of the Boards of Morgan and the Bank. See "Election of directors" on page 6. Peter D. Hancock Age 41 Chief Financial Officer of Morgan and the Bank since June 1999 and Chairman of the Capital Committee and the Risk Management Committee of Morgan since January 1999; Vice Chairman of the Board of Directors of J.P. Morgan Securities Inc. from June 1996 to April 1999; member of the Board of Directors of J.P. Morgan Securities Inc. from May 1995 to April 1999; Managing Director of Morgan from February 1999 to June 1999, of J.P. Morgan Securities Inc. from April 1995 to June 1996, and of the Bank from January 1990 to April 1995. Thomas B. Ketchum Age 49 Chief Administrative Officer of Morgan since January 1998; member of the Board of Directors of J.P. Morgan Securities Inc. since October 1995; Managing Director of J.P. Morgan Securities Inc. since July 1994; Managing Director of Morgan from August 1992 to January 1998 and of the Bank from November 1986 to July 1992. Rachel F. Robbins Age 49 General Counsel and Secretary of Morgan since February 1996 and Managing Director, General Counsel, and Secretary of the Bank since March 1997; Managing Director of Morgan and of J.P. Morgan Securities Inc. since January 1988; member of the Board of Directors of J.P. Morgan Securities Inc. since April 1986; General Counsel and Secretary of J.P. Morgan Securities Inc. since January 1986; Deputy General Counsel of Morgan from July 1992 to February 1996. David H. Sidwell Age 46 Managing Director and Controller of Morgan and the Bank since December 1994; Senior Vice President and Controller of Morgan and the Bank from April 1994 to December 1994; Senior Vice President of the Bank from February 1989 to April 1994. 10 Stock ownership of management ================================================== The following table shows, as of February 25, 2000, the Morgan stock-based holdings of each director, each executive officer named in the Summary Compensation Table appearing on page 16, and all directors and executive officers as a group, based on information provided by these individuals. Each individual beneficially owns less than 1 percent of our common stock. Except as described in the footnotes to the table, each person has sole investment and voting power over the shares shown in the "Stock" column of the table. --------------------------------------------------- Name of individual or group Stock(1) Total(2) --------------------------------------------------- Douglas A. Warner III ...... 456,540(3) 1,397,210 Walter A. Gubert ........... 176,640(4) 785,646 Roberto G. Mendoza ......... 341,772 1,046,595 Michael E. Patterson ....... 236,849(5) 508,364 Peter D. Hancock ........... 72,710 598,792 Thomas B. Ketchum .......... 127,054(6) 639,439 Paul A. Allaire ............ 5,000 5,897 Riley P. Bechtel ........... 500 2,324 Lawrence A. Bossidy ........ 5,000 5,656 Martin Feldstein ........... 1,000 3,746 Ellen V. Futter ............ 500(7) 1,397 Hanna H. Gray .............. 800 3,833 James R. Houghton .......... 1,000 4,033 James L. Ketelsen .......... 7,800 10,833 John A. Krol ............... 2,000 4,383 Lee R. Raymond ............. 500 13,425 Richard D. Simmons ......... 1,000 4,033 Kurt F. Viermetz ........... 218,364 266,880 LIoyd D. Ward .............. 1,000 1,000 Douglas C. Yearley ......... 1,000(8) 3,883 All directors and executive officers as a group ...... 1,817,263(9) 5,614,724 --------------------------------------------------- 1 Includes shares of our common stock beneficially owned, directly or indirectly. The number of shares in the column also includes the following shares of common stock which the individual(s) had the right to acquire within 60 days of February 25, 2000, through the exercise of options: Mr. Warner, 398,086 shares; Mr. Gubert, 171,000 shares; Mr. Mendoza, 260,000 shares; Mr. Patterson, 223,695 shares; Mr. Hancock, 57,226 shares; Mr. Ketchum, 98,732 shares; Mr. Viermetz, 40,000 shares; all directors and executive officers as a group, 1,400,072 shares. 2 Shows total stock-based holdings, including securities included in the "Stock" column (as described in footnote 1), plus non-voting interests, including restricted stock, deferred compensation accounted for as units of common stock, stock options that will not become exercisable within 60 days of February 25, 2000, awards of share credits under the Director Stock Plan (1992) described on page 9, and directors' fees deferred as units of common stock under the Deferred Compensation Plan for Directors' Fees described on page 9. 3 Includes 6,000 shares owned by his spouse and 240 shares held in custodial accounts for his children. Mr. Warner disclaims beneficial ownership of these shares. 4 Includes 5,377 shares owned jointly with his spouse, with whom investment and voting power is shared. 5 Includes 4,717 shares held in trust for family members. Mr. Patterson disclaims beneficial ownership of all but 1,600 of these shares. 6 Includes 575 shares held in trust for his children. Mr. Ketchum disclaims beneficial ownership of these shares. 7 Shares owned jointly with her spouse, with whom investment and voting power is shared. 8 Shares held in trust for family members. 9 As a group, beneficially owns 1.11 percent of Morgan's common stock. 11 Stock ownership of certain beneficial owners ================================================== We have been notified by Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), World Financial Center, North Tower, 250 Vesey Street, New York, New York 10281, that as of December 31, 1999, they are the beneficial owners (as defined by rules of the Securities and Exchange Commission (SEC)) of 10,114,033 shares of our common stock, representing 5.8% of our outstanding shares. According to the Schedule 13G filed by them with the SEC, these shares were acquired in the ordinary course of business, were not acquired for the purpose of, and do not have the effect of, changing or influencing control over us, and were not acquired in connection with or as a party to any transaction having such purpose or effect. In addition, Merrill Lynch disclaims beneficial ownership of these shares. Merrill Lynch, a broker-dealer and the sponsor of various unit investment trusts which invest in equity securities, including our stock, has shared voting and investment power over these shares. Compensation committee report on executive compensation ================================================== Role of the committee The Committee on Management Development and and the Board Executive Compensation, composed entirely of independent outside directors ("Outside Directors"), is responsible for determining and ensuring appropriate administration of Morgan's executive compensation policies for its senior management within guidelines and plans approved by the Board of Directors. The committee's recommendations regarding officers who are directors are subject to the approval of the full board of Outside Directors (with officer directors not participating). Compensation Morgan's executive compensation programs are philosophy designed to attract, reward, and retain highly qualified and effective executives and to encourage the achievement of business objectives, including superior corporate performance. The programs seek: o To foster a performance-oriented environment, where variable compensation is based upon corporate and business group as well as individual performance as measured by achievement of short-term and long-term objectives, taking into account economic conditions and competitive compensation levels. o To enhance management's focus on maximizing long-term stockholder value through a strong emphasis on stock-based compensation. o To increase the variable portion of total compensation (both cash and stock) as an individual's level of responsibility increases. This "mix" further aligns the interests of senior management and stockholders. o To promote a cohesive, team-oriented ethic among members of senior management in order to maintain the competitive advantage of efficiently integrating diverse global business capabilities. Components of The compensation strategy for Morgan's senior executive compensation management is composed of base salary, annual strategy incentive compensation (of which a substantial portion is awarded in the form of restricted stock), stock option awards, and special long-term performance awards. 12 Base salary Base salaries for Morgan's senior management are determined by evaluating the responsibilities associated with the position held, an individual's overall level of experience and competitive practice. However, in keeping with Morgan's emphasis on variable rather than fixed compensation, base salaries represent a relatively low percentage of total compensation for these individuals. Incentive compensation In keeping with its philosophy of increasing, as an officer's level of responsibility increases, the portion of total compensation that depends upon individual and Morgan performance, Morgan's executive compensation program is heavily weighted toward incentive compensation. To establish and maintain a common focus and shared goals among Morgan's most senior management, incentive compensation for this group is determined at year end by the committee, based on its assessment of Morgan's performance as measured by various quantitative and qualitative factors. The primary quantitative factors reviewed by the committee include such financial performance measures as net income (after provision for a threshold return to stockholders) and return on average common stockholders' equity, both as absolute measures and relative to previous years. Qualitative factors evaluated by the committee include Morgan's performance in relation to industry performance, progress toward achievement of Morgan's short-term and long-term business goals, the quality of Morgan's earnings, and the overall business and economic environment. In making its determination, the committee also reviews competitive compensation levels and trends. Each participant in this incentive compensation arrangement is allocated a specified number of shares out of a pool of shares managed by the committee. The committee also determines the value of each share based upon its qualitative and quantitative assessment of Morgan's performance and competitive compensation levels and trends. Actual incentive compensation awards may be further adjusted up or down under special circumstances, to reflect individual or business unit performance. As discussed further below, a substantial portion of these awards is granted in the form of restricted stock. Performance plan In July 1998, the Board of Directors adopted the awards 1998 Performance Plan of J.P. Morgan & Co. Incorporated and Affiliated Companies (the "1998 Performance Plan"). The 1998 Performance Plan was adopted in order to underscore the firm's determined drive for superior performance. Awards will be earned in January 2001 based on the achievement of firm-wide performance goals including significantly improved risk-adjusted returns, earnings growth, and expense management. Awards granted to senior management in 1998 provide for a potential payout to each recipient of 1 to 2 times the recipient's average incentive compensation for 1998-2000, provided the performance targets are achieved. Stock-based The committee believes that stock ownership compensation and enhances individuals' focus on maximizing stock ownership long-term stockholder value. Accordingly, senior officers are strongly encouraged to develop significant equity positions in Morgan. Morgan's executive compensation programs are designed to facilitate stock ownership and to ensure that, as an individual's level of responsibility increases, financial rewards depend significantly on Morgan's overall performance. 13 Restricted stock Each year, a substantial proportion of incentive compensation for senior management is awarded in the form of restricted stock, issued at fair market value on the date of grant and subject to five-year vesting. Since the value of restricted stock awards will ultimately depend on the market value of Morgan common stock, the committee believes these awards will serve as an ongoing incentive to preserve and increase stockholder value. For 1999, members of senior management received 45% (50% in the case of the Chairman) of their total incentive compensation awards in the form of restricted stock. This percentage has been unchanged since 1995, evidencing the committee's continued commitment to fostering significant senior management stock ownership. Stock options Morgan's executive compensation programs also include stock option awards, which are intended to provide additional incentive to increase stockholder value. All 1999 stock option awards to senior management were granted with an exercise price equal to the fair market value of Morgan stock on the date of grant and become exercisable over five years on a pro rata basis. Because Morgan stock option awards provide value only in the event of share price appreciation, the committee believes stock options represent an important component of a well-balanced incentive program. Individual award levels are based upon a subjective evaluation of each individual's overall past and expected future contribution; therefore, no specific formula is used to determine option awards for any employee. Morgan has generally granted stock option awards to members of senior management in July of each year. Corporate performance In 1999, net income increased to $2.055 billion, and CEO compensation nearly double 1998 operating earnings before non-recurring gains and special charges. Return on equity for 1999 was 18.4%, compared with 8.6% for the prior year. Revenues rose 31% on increased client activity across the firm's businesses globally. The firm achieved its target of reducing core operating expenses before performance-driven compensation by $400 million. All client-related business activities produced strong results, led by equities, credit markets, credit portfolio, and asset management services. Revenues from equity investments were up substantially, while proprietary investing and trading revenues fell. Morgan made excellent progress during 1999 on its key strategic initiatives: growth of its investment banking, equities, and asset management capabilities and profits; further leveraging its leadership in the markets businesses; strategic transformation of its credit business; and improvement in productivity. The firm substantially cut the risk and capital requirements of its credit and market activities. As Chairman and Chief Executive Officer, Mr. Warner has set a clear strategic course for the company since assuming his current roles in 1995. Under his leadership, Morgan achieved the successful transformation of its core capabilities, its top strategic goal. The firm has decisively shifted the mix of business to emphasize client-generated revenues and lessen the firm's reliance on proprietary investing and trading activities. In 1999, strong revenue growth and improved expense management and capital productivity combined to improve margins and substantially increase the firm's return on equity. 14 Recognizing the strong growth in Morgan's 1999 earnings and significant progress on its strategic priorities, Mr. Warner's total annual compensation increased to $9,900,000, including a restricted stock award with a grant date value of $4,600,000. This compares with $3,050,000 in 1998, when his compensation was reduced by 43.4% from 1997 levels to reflect lower earnings that year. The annual restricted stock award is included under long-term compensation awards in the Summary Compensation Table. Mr. Warner was allocated the largest number of shares in the incentive compensation arrangement for senior officers for 1999, and the percentage of annual incentive compensation that he received in the form of restricted stock -50% - was the highest in the firm. Mr. Warner was also awarded 150,000 stock options with an exercise price equal to 100% of the fair market value of Morgan stock on the grant date (the material terms of which are described under "Option grants in 1999"). In setting Mr. Warner's compensation, the committee also takes into account the compensation levels of chief executive officers of Morgan's peer companies and the compensation of other senior officers of Morgan. Tax deductibility of Section 162(m) of the Internal Revenue Code limits executive compensation the tax deductibility of compensation in excess of $1 million paid to certain members of senior management, unless the payments are made under plans which satisfy the technical requirements of the statute (and regulations). While the committee currently intends to pursue a strategy of maximizing deductibility of senior management compensation by making awards under the 1995 Executive Officer Performance Plan and 1995 Stock Incentive Plan (both of which meet the requirements of Section 162(m) and were approved by stockholders during 1995), it also believes that it is important to maintain the flexibility to take actions it considers to be in the best interest of Morgan and its stockholders, which may be based on considerations in addition to Section 162(m). The Committee on Management Development and Executive Compensation James R. Houghton, Chairman Riley P. Bechtel Lee R. Raymond Douglas C. Yearley 15 Summary compensation table ================================================== The table below shows, for the years ending December 31, 1999, 1998, and 1997, the annual and long-term compensation that we paid or accrued for those years to our Chief Executive Officer and four most highly compensated executive officers.
- ----------------------------------------------------------------------------------------------------------- Annual compensation Long-term compensation awards ------------------- ----------------------------- Securities Restricted underlying All other Name and stock award stock options compensation principal position Year Salary ($) Bonus ($) ($) (1) (2) (# shares) ($) (3) - ----------------------------------------------------------------------------------------------------------- Douglas A Warner III 1999 $700,000 $4,600,000 $4,600,000 150,000 $16,151 Chairman 1998 700,000 1,175,000 1,175,000 125,000 18,721 1997 691,667 2,350,000 2,350,000 80,000 18,624 Walter A Gubert* 1999 450,000 4,125,000 3,375,000 100,000 32,300 Vice Chairman 1998 400,000 1,100,000 900,000 75,000 33,117 Roberto G Mendoza 1999 450,000 3,698,750 3,026,250 100,000 7,696 Vice Chairman 1998 450,000 1,100,000 900,000 75,000 9,034 1997 447,917 2,117,500 1,732,500 50,000 8,582 Peter D Hancock** 1999 400,000 3,300,000 2,700,000 90,000 224 Chief Financial Officer Thomas B Ketchum* 1999 400,000 3,300,000 2,700,000 90,000 31,818 Chief Administrative 1998 400,000 962,500 787,500 60,000 28,056 Officer - -----------------------------------------------------------------------------------------------------------
* Not an executive officer of Morgan in 1997. ** Not an executive officer of Morgan prior to 1999. 1 The amounts reported in this column represent the fair market value of restricted stock units awarded at 100 percent of the fair market value of our common stock on the grant date. This fair market value was: $123.281 for 1999 awards, $106.844 for 1998 awards, and $101.469 for 1997 awards. This value is not discounted for restrictions on the stock units. Annual dividend equivalents are paid in cash or are converted into additional share credits in accordance with the terms of the awards and the provisions of the plan under which each award was granted. Restricted stock awards generally become vested five years after the date of grant or, in the case of death, become immediately vested in full. Generally, a committee composed of all non-employee directors may accelerate vesting of restricted stock in its sole discretion. Upon a Change in Control, as defined in the 1995 Stock Incentive Plan (and the predecessor plans), restricted stock awards will become immediately vested (unless the committee administering the plan determines otherwise). 2 The named officers had the following non-vested restricted stock award balances, in aggregate, outstanding as of January 19, 2000: Mr. Warner, 152,690 shares ($19,209,656); Mr. Gubert, 110,591 shares ($13,912,035); Mr. Mendoza, 109,028 shares ($13,723,622); Mr. Hancock, 117,087 shares ($14,752,959); and Mr. Ketchum, 98,007 shares ($12,336,891). Dollar values are based on (i) the closing price of our common stock on December 31, 1999, ($126.625) for stock awards which were outstanding on that date and (ii) the average of the high and low prices of our common stock on January 19, 2000, ($123.281) for stock awards granted as of that date. 3 The amounts reported in this column represent interest exceeding 120 percent of the applicable federal rate deemed to have accrued on deferrals under our incentive compensation plans (based on termination and distribution at the earliest date permissible under the plans although no such interest will be accrued assuming employment until normal retirement age). 16 Stock options ================================================== The following tables show information on stock options that we have awarded to our Chief Executive Officer and four most highly compensated executive officers. The first table shows, along with some additional information, the estimated grant date present value of stock options granted in 1999. These values are calculated pursuant to the proxy rules of the SEC and are calculated under the Black-Scholes model for pricing options. The actual pretax gain realized upon the exercise of stock options will depend upon the excess of the market price of our common stock over the exercise price per share of the stock option at the time the option is exercised. The second table shows select information relating to stock options exercised during 1999 and stock options outstanding as of December 31, 1999. We do not grant any stock appreciation rights.
Option grants in 1999 - ------------------------------------------------------------------------------------------------- Percent of total Exercise or Estimated grant Options options granted base price Expiration date present Name granted(#)(1) to employees ($/Sh) date value($)(2) - ------------------------------------------------------------------------------------------------- Douglas A. Warner III 150,000 2.43% $135.719 7/19/09 $6,660,360 Walter A. Gubert 100,000 1.62 135.719 7/19/09 4,440,240 Roberto G. Mendoza 100,000 1.62 135.719 7/19/09 4,440,240 Peter D. Hancock 90,000 1.46 135.719 7/19/09 3,996,216 Thomas B. Ketchum 90,000 1.46 135.719 7/19/09 3,996,216 - -------------------------------------------------------------------------------------------------
1 Options vest as to one-fifth of the shares subject thereto on the first, second, third, fourth, and fifth anniversaries of the grant date. Upon a Change in Control, as defined in the 1995 Stock Incentive Plan, the options will become immediately vested (unless the committee determines otherwise). 2 Valued using the Black-Scholes option pricing model. The assumptions used for the variables in the model were: 26.11% volatility; a 10-year risk-free rate of 5.7256%, compounded annually; a 3.3% dividend yield; and a 10-year option term.
Aggregated option exercises in 1999 and year-end option values - ------------------------------------------------------------------------------------------------------------------------ Aggregated option exercises Unexercised options at year-end ----------------------------------- ----------------------------------------------------------- Value of securities underlying Number (#) in-the-money options ($) Shares acquired --------------------------- -------------------------- Name on exercise(#) Value realized($) Exercisable Unexercisable Exercisable Unexercisable - ------------------------------------------------------------------------------------------------------------------------ Douglas A. Warner III 0 $ 0 398,086 598,000 $20,955,318 $7,321,476 Walter A. Gubert 0 0 171,000 384,000 8,794,992 8,717,488 Roberto G. Mendoza 55,000 3,814,839 260,000 390,000 13,994,365 4,844,110 Peter D. Hancock 0 0 57,226 374,000 1,625,961 8,717,488 Thomas B. Ketchum 3,914 306,189 98,732 359,000 4,208,971 8,662,177 - ------------------------------------------------------------------------------------------------------------------------
17 Stock performance graphs ================================================== The following graphs show changes over the past five- and 10-year periods in the value of $100 invested in: (1) our common stock; (2) Standard & Poor's 500 Index; (3) Standard & Poor's Financial Index; and (4) companies which comprised the Dow Jones Industrial Average as of December 31, 1999 (of which Morgan is one). [The following information was depicted as a line graph in the printed material] Comparisons of five-year total stockholder return In dollars -------------------------------------------------- 1994 1995 1996 1997 1998 1999 J.P. Morgan 100.0 149.2 188.4 225.2 217.3 270.2 S&P 500 100.0 137.5 169.1 225.5 290.0 351.0 S&P Financial 100.0 154.1 208.2 308.3 343.5 357.1 DJ Industrial 100.0 136.9 176.5 220.5 260.6 331.6 [The following information was depicted as a line graph in the printed material]
Comparisons of 10-year total stockholder return In dollars - --------------------------------------------------------------------------------------------------------------- 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 J.P. Morgan 100.0 106.0 170.0 169.0 184.6 156.4 233.4 294.7 352.3 339.8 422.7 S&P 500 100.0 96.9 126.4 136.0 149.7 151.6 208.6 256.4 342.0 439.7 532.2 S&P Financial 100.0 78.6 118.3 146.0 162.2 156.4 240.9 325.6 482.2 537.3 558.6 DJ Industrial 100.0 99.5 123.6 132.7 155.3 163.1 223.3 287.8 359.5 424.8 540.6
The year-end values of each investment shown in the preceding graphs are based on share price appreciation plus dividends, with the dividends reinvested as of the last business day of the month during which such dividends were ex-dividend. The calculations exclude trading commissions and taxes. Total stockholder returns from each investment, whether measured in dollars or percentages, can be calculated from the year-end investment values shown beneath each graph. 18 Retirement benefits ================================================== The Bank maintains the Cash Balance Plan of Morgan Guaranty Trust Company of New York (the "Retirement Plan"), which provides benefits for eligible U.S. employees (regular employees with six months of continuous service who have attained age 21) of Morgan and the Bank and participating subsidiaries. Through December 31, 1998, retirement benefits were accrued under a traditional defined benefit plan. Effective January 1, 1999, this plan was converted to a cash balance formula and accrued benefits under the prior formula were converted to individual cash balance accounts based on the present value of the accrued benefits as of the date of the conversion. Under the cash balance formula, each participant has an account, for record-keeping purposes only, to which credits are allocated each month based on 5% of each participant's monthly base salary up to a maximum of $12,500. In addition, all balances in the accounts of participants earn a fixed rate of interest which is credited monthly. The interest rate for a particular year is based on the average of the monthly 30-year U.S. Treasury bond yields for the previous September, October, and November. For 1999 the interest rate was 5.15% and for 2000 the rate is 6.16%. At retirement or termination of employment, an amount equal to the then vested balance is payable to the participant in the form of an immediate or deferred lump sum or equivalent monthly annuity benefit for the entire benefit under the Retirement Plan. To recognize the transition to the cash balance formula, all participants of the Retirement Plan who were earning benefits under the prior formula as of December 31, 1998, are eligible for a minimum benefit. This minimum benefit is calculated using the prior, traditional final average pay defined benefit formula using pay and credited service through termination or December 31, 2003, if earlier. After December 31, 2003, the accrued benefit under the prior formula is frozen and continues to act as a minimum plan benefit. At retirement or termination, this minimum benefit is payable in the same form as the cash balance benefit. The Bank also maintains the Benefit Equalization Plan, an unfunded, non-qualified deferred compensation arrangement that provides for benefits that are not payable under the Retirement Plan because of maximum limitations imposed on such plans by the Internal Revenue Code. Estimate of The table below sets forth the estimated annual retirement benefits benefit payable to each of the executives named in the Summary Compensation Table as a single life annuity at age 65 under the Retirement Plan and the Benefit Equalization Plan. The projections contained in the table are based on the following assumptions: (1) employment until age 65 subject to the Retirement Plan's maximum recognized base salary of $150,000 until that time; (2) interest credits at the actual rates for all years through 2000 and 6.16% for all years following; and (3) the conversion to a single life annuity at age 65 based on an interest rate of 6.16% and the 1983 Group Annuity Mortality Table, which sets forth generally accepted life expectancies. The estimated benefits reflect any applicable minimum benefits. 19 Summary of estimated age 65 retirement benefits (as an annual life annuity) -------------------------------------------------- Estimated annual Name retirement benefit -------------------------------------------------- Douglas A. Warner III .......... $504,200 Walter A. Gubert ............... 72,612 Roberto G. Mendoza ............. 455,837 Peter D. Hancock ............... 69,546 Thomas B. Ketchum .............. 148,873 -------------------------------------------------- Morgan's International Cash Balance Plan, of which Mr. Gubert and Mr. Hancock are members by virtue of prior overseas services, provides additional retirement benefits to certain employees assigned outside their home countries. Prior to 1999, this benefit was based on the employee's average annual salary for the three highest-paid consecutive years within the final 10 years of credited service preceding retirement. Beginning in 1999, the International Cash Balance Plan benefit was converted to individual cash balance accounts to which salary and interest credits are credited in the same manner as for the Retirement Plan described above. The International Cash Balance Plan benefit is paid in a lump sum. As of December 31, 1999, Mr. Gubert and Mr. Hancock would have been entitled to receive a lump sum retirement benefit of approximately $823,399 and $100,965 respectively under the International Cash Balance Plan. Transactions with directors and officers ================================================== In the ordinary course of our business we engage in transactions with some of our directors and executive officers and their associates, or with organizations of which some of our directors are officers or trustees. These transactions are on an arm's length basis and cover a broad range of our business activities, such as loans, deposits, purchases of our commercial paper, purchases of securities issued by others, and investment banking, financial advisory, and other financial services and market transactions. In the ordinary course of our business, we use the products or services of or have other transactions with a number of organizations of which our directors are officers, including Corning Incorporated, E.I. du Pont de Nemours and Company, Exxon Mobil Corporation, Honeywell International Inc., Maytag Corporation, Phelps Dodge Corporation, and Xerox Corporation. Other than as described in this proxy statement, no Morgan director or executive officer was indebted to us during 1999 for any amount in excess of $60,000. Employees' securities Selected employees of Morgan, including executive company officers, are offered the opportunity to become limited partners of the Sixty Wall Street Fund, L.P. (the "Fund"), an investment vehicle which qualifies as an "employees' securities company" for purposes of the Investment Company Act of 1940, as amended. The Fund invests in Morgan's private equity investments alongside J.P. Morgan Capital Corporation, a subsidiary thereof, or certain private equity funds managed by J.P. Morgan Investment Management Inc. In 1999, the amounts invested by limited partners were augmented by a combination of recourse and nonrecourse loans from Morgan at an interest rate of LIBOR + 150 basis points, each of which is to be repaid to Morgan upon the realization of proceeds from the applicable portfolio investments. 20 Amounts invested in the Fund by each of Morgan's executive officers in 1999 are set forth below, along with the amount of loans made to these individuals during 1999 and the aggregate amount of all loans and interest outstanding relating to the individuals' aggregate 1999 investment in the Fund:
------------------------------------------------------------------------------ Loan principal and interest Amount invested in Loans issued in outstanding as of Name 1999 1999 December 31, 1999 ------------------------------------------------------------------------------ Walter A. Gubert $250,000 $750,000 $771,130 Roberto G. Mendoza 100,000 300,000 308,452 Michael E. Patterson 50,000 150,000 154,226 Peter D. Hancock 100,000 300,000 308,452 Thomas B. Ketchum 200,000 600,000 616,904 Rachel F. Robbins 100,000 300,000 308,452 ------------------------------------------------------------------------------
Item 2: Approval of PricewaterhouseCoopers LLP as independent accountants ================================================== We are proposing to appoint PricewaterhouseCoopers LLP ("PwC") as our independent accounting firm for 2000 to examine the financial statements of Morgan and its consolidated subsidiaries, including the Bank, and to assist the Examining Committee of the Bank in performing its directors' examination as required by law. The Audit Committee has recommended to the Board the appointment of PwC. We are submitting this selection to you for your approval. PwC served as our principal independent accounting firm in 1999. Audit fees to PwC in 1999 totaled approximately $9.7 million. Representatives of PwC will be at the annual meeting to answer your questions. The Board of Directors recommends a vote FOR this proposal. Item 3: Stockholder proposal relating to director share ownership ================================================== Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W., Suite 215, Washington, D.C. 20037, who owns 50 shares of common stock of Morgan, has indicated that she will introduce the following resolution at the meeting: "RESOLVED: That the stockholders of J.P. Morgan assembled in Annual Meeting in person and by proxy, hereby recommend that the Board of Directors take the necessary steps to require all members of the Board of Directors to own a minimum of 1000 shares of voting stock in J.P. Morgan starting next year." In support of the foregoing resolution, the proponent states: "REASONS: Stock ownership by Directors makes them partners with other shareholders. "Certainly 1000 shares is a reasonable minimum amount for ALL directors to own in view of the director fees and perks they receive. "Several directors according to the 1999 proxy statement did NOT own at least 1000 shares beneficially directly in their own name. "If you AGREE, please mark your proxy FOR this proposal." The Board of Directors recommends a vote AGAINST this proposal. 21 Similar resolutions were presented in 1991 and 1990 and was rejected in 1991 by 96.86% of the votes cast. We believe that nominees for director should continue to be recommended for election on the basis of such qualities as ability, experience, and soundness of judgment. The minimum share ownership requirement that is suggested is arbitrary and would limit excessively the number of potential candidates. We believe, therefore, that the imposition of a minimum share ownership requirement serves no useful purpose, but would unnecessarily restrict director selection in the future. Item 4: Other matters ================================================== We do not know of any matters to be acted upon at the meeting other than those discussed in this proxy statement. If any other matter is presented, the individuals named as proxies will vote on the matter in his or her best judgment. Section 16(a) Section 16(a) of the 1934 Act requires our beneficial ownership executive officers and directors and any other reporting compliance persons who own more than 10 percent of our common stock ("Reporting Persons") to file reports of ownership and changes in ownership on Forms 3, 4, and 5 with the SEC and the New York Stock Exchange (NYSE). These Reporting Persons are required by SEC regulation to furnish us with copies of all Forms 3, 4, and 5 that they file with the SEC and NYSE. Based solely on our review of copies of these forms furnished to us and written representations from Reporting Persons, we believe that all of our Reporting Persons complied with these filing requirements for transactions during fiscal year 1999, except that Rachel Robbins was late in reporting a sale of common shares from her sons' accounts and in reporting a charitable contribution of common shares for the fiscal year 1997. Proxy solicitation We are soliciting this proxy on behalf of our Board of Directors and will bear the solicitation expenses. We are making this solicitation by mail but we may also solicit by telephone or in person. We have hired Morrow & Co. for a fee of $13,500, plus out-of-pocket expenses, to assist in the solicitation. We will reimburse banks, brokerage houses, and other institutions, nominees, and fiduciaries, if they request, for their expenses in forwarding proxy materials to beneficial owners. Stockholder proposals If you want to submit a proposal for possible inclusion in our proxy statement for the 2001 annual meeting of stockholders, you must ensure that your proposal is received by us on or before November 10, 2000. If you intend to present a proposal at our 2001 annual meeting and do not request timely inclusion of the proposal in our proxy statement, then we must receive notice of such proposal no later than January 24, 2001. If we do not receive notice by that date, no discussion of your proposal is required to be included in our 2001 proxy statement and we may use our discretionary authority to vote on the proposal if you do present it at our annual meeting. March 8, 2000 Rachel F. Robbins Secretary 22 PROXY J.P. Morgan & Co. Incorporated Proxy solicited on behalf of the Board of Directors of the Company for Annual Meeting of Stockholders, April 12, 2000 The undersigned hereby constitutes and appoints Francis J. Morison, Martha J. Gallo and Rachel F. Robbins, and each of them, the true and lawful agents and proxies of the undersigned with full power of substitution in each, to represent the undersigned at the Annual Meeting of Stockholders of J.P. MORGAN & CO. INCORPORATED to be held in Morgan Hall West, 46th floor, 60 Wall Street, New York, New York, on Wednesday, April 12, 2000, at 11 a.m., and at any adjournment of said meeting, and to vote, as directed on the reverse side of this card, on all specified matters coming before said meeting, and in their discretion, upon such other matters not specified as may come before said meeting. Election of Directors, Nominees: 01. Douglas A. Warner III, 02. Paul A. Allaire, 03. Riley P. Bechtel, 04. Lawrence A. Bossidy, 05. Martin Feldstein, 06. Ellen V. Futter, 07. Hanna H. Gray, 08. Walter A. Gubert, 09. James R. Houghton, 10. James L. Ketelsen, 11. John A. Krol, 12. Michael E. Patterson, 13. Lee R. Raymond, 14. Lloyd D. Ward and 15. Douglas C. Yearley. You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors' recommendations. The Proxies cannot vote your shares unless you sign and return this card to J.P. Morgan & Co. Incorporated, c/o First Chicago Trust Company, a division of EquiServe, P.O. Box 8212, Edison, N.J. 08818-9079. ----------- SEE REVERSE SIDE ----------- - -------------------------------------------------------------------------------- FOLD AND DETACH HERE You may also vote the shares held in this account by telephone or electronically through the Internet 24 hours a day, 7 days a week. Voting by telephone or via the Internet will eliminate the need to mail voted proxy card(s) representing shares held in this account. Your telephone or Internet vote must be received by 12:00 a.m., Eastern Standard time, the day of the meeting, April 12, 2000. To vote please follow the steps below: o Have your proxy card and social security number available. o Be ready to enter the PIN number indicated on the reverse side of the card just below the perforation. To vote using the telephone: o Using a touch-tone telephone, dial 1-877-PRX-VOTE (1-877-779-8683) for calls within the U.S. and Canada. If you are calling from another country, dial 1-201-536-8073. To vote using the Internet: o Log on to the Internet and go to the website http://www.eproxyvote.com/jpm. o You may elect to receive next year's proxy materials electronically at the website http://www.eproxyvote.com/jpm. Both voting systems preserve the confidentiality of your vote and will confirm your voting instructions with you. You may also change your selections on any or all of the proposals to be voted. YOUR VOTE IS IMPORTANT TO US. THANK YOU FOR VOTING. [X] Please mark your votes as in this example. 2685 The Board of Directors recommends a vote "FOR" Items 1 and 2. - -------------------------------------------------------------------------------- This proxy will be voted "FOR" Items 1 and 2 if no choice is specified. - -------------------------------------------------------------------------------- FOR WITHHELD FOR AGAINST ABSTAIN 1. Election of [ ] [ ] 2. Approval of [ ] [ ] [ ] Directors. independent (see reverse) accountants. For, except vote withheld from the following nominee(s): ______________________________________________ - -------------------------------------------------------------------------------- The Board of Directors recommends a vote "AGAINST" Item 3. - -------------------------------------------------------------------------------- This proxy will be voted "AGAINST" Item 3 if no choice is specified. - -------------------------------------------------------------------------------- FOR AGAINST ABSTAIN 3. Stockholder proposal [ ] [ ] [ ] relating to director share ownership. - -------------------------------------------------------------------------------- SIGNATURE (S)______________________________________________DATE_________________ The signer hereby revokes all proxies previously given by the signer to vote at this meeting or any adjournment of the meeting. NOTE: Please sign exactly as your name appears on this proxy card. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. - -------------------------------------------------------------------------------- FOLD AND DETACH HERE J.P. Morgan & Co. Incorporated Annual Meeting of Stockholders Wednesday, April 12, 2000 11:00 a.m. J.P. Morgan & Co. Incorporated Morgan Hall West 60 Wall Street New York, N.Y. 10260-0060 IMPORTANT NOTICE ---------------- IT IS IMPORTANT THAT YOU VOTE, SIGN AND RETURN THE ABOVE PROXY AS SOON AS POSSIBLE. -----END PRIVACY-ENHANCED MESSAGE-----